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When is a European Biotech going to match its US counterparts?

Despite the hurdles,there is optimism that a European biotech will emerge as a global marketing success

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14 January 2022

By: Mike Young

A striking thing in the world of biotech is that there are no European examples that are close to matching US companies such Amgen, Gilead or Biogen on the global stage1. This is true despite the fact that there are flourishing biotech hubs across Europe including in Switzerland, Denmark, UK, Germany and more recently the Netherlands. One example of the strength of European biotech has been demonstrated during the pandemic; two of the three major anti-Covid vaccines were originated in Europe – Pfizer’s vaccine coming from BioNTech in Germany and AstraZeneca’s from Oxford University in the UK. So what accounts for the disparity in commercial success between European and US biotech companies?

Historically US biotechs have enjoyed important competitive advantages. They have a large domestic market which relative to Europe has very few price controls. They also have many great universities whose biomedical research has benefited from massive spending by federal goverments. They benefit too from an efficient system of transferring technology from academic labs to business, plus a developed venture capital market and NASDAQ, which has been described as a congenial home for young, high growth companies. Additionally, the success of  pioneers such as Genetech, who successfully brought genetically engineered human insulin to market,  boosted the confidence of the US investment community, encouraging more specialist investors as well as generating a growing pool of experienced managers2.

Even today, when biotech in Europe is described as booming, the US continues to enjoy financial advantages because of its appetite for risk, levels of knowledge and biotech expertise. There is a difference in scale, as demonstrated by the amount of venture capital raised. In 2020 British biotechs raised more than anywhere else in Europe but the figure of $1.9bn was dwarfed by the sums raised by US biotech hubs with Massachusetts raising $6.4bn and San Francisco $6.1.Also when European biotechs go public they often tend towards the NASDAQ attracted by the higher valuations and simpler regulations.

Another important and highly relevant factor is that pharma has a global hunger to acquire the right biotech products or companies. This offers the opportunity for European biotechs to reach a certain size and sell, as shown by Sanofi’s $4.8bn acquisition of Belgium biotech Ablynx and more recently of the UK’s Kymab for $1.45bn. Alternatively, rather than market products themselves they can licence out to larger pharma companies. The three largest biotechs in Europe, BioNTech, Genmab and Horizon Therapeutics all currently prefer to work with partners in big pharma. To be fair these kinds of deals and arrangements are happening in the US too, one of the more striking being European pharma giant AstraZeneca’s acquisition of US biotech Alexion for $39bn.

If a European based biotech is to remain independent and develop a global marketing presence it will need to convince investors in a less confident financial environment that this is the route to the greatest returns. The US system has the patience and belief to allow companies sufficient time to fully blossom. Gilead took 15 years to achieve profitability and another 10 to reach big biotech status. Whether this kind of support will occur in Europe no one yet knows, although there is plenty of optimism in the sector.

Ultimately to  be a success on the world stage a European company must conquer the US, the largest and most well developed biotech market on the planet. To win in this fiercely competitive environment it will need both a fantastic product and a very high level of talent and experience in marketing, as well as other disciplines. In the words of a famous American president, ‘nothing worth having comes easy.’ With attractive alternative routes to success it is uncertain as to whether an independent European biotech company will desire to go all the way. To do so it will need to justify the optimism by turning Europe’s reputation for great science into a worldwide marketing success.

 

 

  1. Bhandari M et al. The UK Biotech sector: The path to global leadership. McKinsey&Company 2021.
  2. Owen G. The secret of a world class biotech sector. Financial Times. 2016.
  3. Breathing life into Britain’s life sciences industry. The Economist. 2021

 

 

 

 

 

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